Little drama expected at Disney meet

But issues linger as Iger presides over first gathering

LOS ANGELES (MarketWatch) -- It's unlikely to match the drama of recent gatherings, which is probably how new Walt Disney Co. Chief Executive Robert Iger wants it at this year's annual meeting.

It should be a fairly routine meeting of shareholders, with the usual donning of Mickey Mouse ears and Donald Duck caps, as Iger and company outline Disney's
DIS, +0.68%
accomplishments during the past year, and the plan for the future.

That will stand in marked contrast to 2004, when nearly half the entertainment giant's shareholders called for former Chief Executive Michael Eisner's head, and last year when a successor to Eisner had yet to be named.

"I should expect this meeting will be reasonably tame," said Jake Balzer, analyst for Guzman & Co. Eisner left the company in September and had handed over the reins to Iger several months before.

Since last year, Iger scored a few key victories. He mended fences with Roy Disney, nephew of the company's namesake and founder, and his partner, Stanley Gold. The two had led a shareholder revolt to remove Eisner and initially opposed Iger's ascendancy to the Disney throne.

Iger also patched up tense relations with Disney's partner, computer animator Pixar
PIXR
and its chairman and chief executive, Steve Jobs, enough to engineer a buyout of the highly successful company.

For the most part, Disney's annual meeting should be one of the happiest places on Earth.

But when Iger takes the stage Friday morning at the Arrowhead Pond in Anaheim, a few blocks away from Disneyland, issues will linger for the first-year chief executive - even personnel concerns.

For one, who will take over for departing Chairman George Mitchell? How will Disney bring Pixar into the company fold. And what role will Jobs play in Disney's future, if any?

The first question is particularly sticky for some watching this year's meeting. Mitchell, who presided over Disney's transition from the Eisner era to the Iger era, is under fire from at least one shareholder service group that wants the former U.S. senator to step down sooner rather than later.

Mitchell was expected to give up the chairmanship at this meeting but has agreed to stay on at the behest of the company, which is still making adjustments.

That has irked Glass Lewis & Co., a proxy service that was active in the 2004 shareholder revolt. During that meeting, Mitchell was second only to Eisner in the number of withhold votes received by shareholders.

Greg Taxin, Glass Lewis' chief executive, said he doesn't think Mitchell is truly an independent director, given his past connections with Eisner and the company. He adds Mitchell, now 72, is at the mandatory retirement age for a director, and will turn 73 in August.

Taxin believes Mitchell was instrumental in ousting Roy Disney from the board in late 2003, reasoning that he had surpassed the retirement age. Roy Disney had said as a company officer, heading the animation division, he was exempt from that requirement.

"Our advice to our clients is to show displeasure for directors who don't live up to their word by withholding their votes for Mitchell," Taxin said.

But Institutional Shareholder Services says letting Mitchell help complete the transition through year's end is fine, provided he follows through and leaves at that time.

Pat McGurn, the group's executive vice president and corporate governance expert, said it appears Disney is on the search for a new director from outside the company, and needs the time to make a thorough inquiry.

"It's our feeling if they were going to make a change with a current director, they would have done it," McGurn said.

One wild card is Jobs, who many see taking on a prominent role at Disney when he becomes the company's largest shareholder as part of the Pixar deal.

That could include the role of chairman, or Disney could be hunting for another to fill that role should Jobs be uninterested in adding the company to his Apple Computer Inc.
AAPL, +0.87%
duties.

"That confuses the issue even more," McGurn said of Jobs. "Anything's possible at this point in time."

Meanwhile, things seem to be humming along in the Magic Kingdom, analysts say. The company's theme parks have fully recovered from their post-Sept. 11 downturn.

Jeff Logsdon at Harris Nesbitt notes that there is high demand for Disney theme parks in the Far East.

Further, the company's ABC network has bounced back thanks to such hits as "Desperate Housewives" and "Lost."

One key concern revolves around the company's film studio. It, like other moviemaking operations, had a down year in 2005 as it failed to reach the $1 billion mark in domestic revenue. It also ranked lower than usual in market share, placing fourth.

With hits like "Eight Below," this current year is looking a bit better but much will hinge on the success of its co-release with Pixar, "Cars" in June, as well as the sequel to "Pirates of the Caribbean" due out later this year.

Most of all, Disney has to come up with a way to help shares lift off and do some broken-field running, says Guzman's Balzer. The stock hasn't cracked what has become a psychological barrier of $30, despite the efforts to mend Disney operations.

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